Rs 10 lakh penalty on Catholic Syrian

TNN|

Jul 27, 2007, 03.16 AM IST

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MUMBAI\KOCHI : The Reserve Bank of India has imposed a penalty of Rs 10 lakh on Catholic Syrian Bank for non-adherence with anti-money laundering guidelines. The penalty is understood to be in continuation of the action taken against banks in the IPO scam unearthed last year.

The IPO scam, where most of the leading new private banks and some public sector banks were slapped fines, involved investors opening multiple accounts to improve their allotment chances in public issues. When IPOs are heavily oversubscribed, investors do not get all the shares that they apply for. But multiple accounts allow them to put in multiple applications, enabling them to get a higher allotment than they are entitled to.

Catholic Syrian Bank officials said the penalty pertained to violations relating to the IPO scam. However, it was only now that the irregularities have been noticed and therefore the delay in regulatory action. Investors are understood to have opened multiple accounts at the bank's Mumbai and Ahmedabad branches. In a statement issued here on Thursday, the RBI said it had imposed two penalties of Rs 5 lakh each. The first penalty pertained to non-adherence with KYC norms and AML standards while opening and operating certain accounts; and the second one referred to bank's failures of internal control systems in detecting irregularities. "The RBI had issued a show-cause notice to the bank. In response thereto, the bank had submitted written replies. On careful examination of the replies, the RBI found that the violations were conclusively established and the penalty was accordingly imposed," a statement issued by RBI said. In January 2006, the RBI announced action against seven commercial banks — Bharat Overseas Bank, Citibank, HDFC Bank, ICICI Bank, Indian Overseas Bank, Standard Chartered Bank and Vijaya Bank for violation of RBI regulations on know your customer (KYC) norms. In addition, the central bank had also placed restrictions on some banks on opening new branches and demat accounts until these banks put systems in place.

Most of the restrictions were lifted this year when banks established that they had put in place measures to identify multiple accounts.